A structure designed to add some extra powder to the letter of credit capacity keg of energy providers has emerged in the private market off the Deutsche Bank Securities desk in New York, sources said.

Deutsche Bank New York is the issuer of $100 million in letter of credit-linked notes linked to Consolidated Natural Gas (CNG), a subsidiary of Dominion Resources. Though the deal is not rated, sources said, CNG has a rating of A3' from Moody's Investors Service and BBB+' from Standard & Poor's.

The notes will be privately placed with investors in a deal expected to close in the next two weeks. Bids are due on July 30. The $100 million transaction is structured as a five-year floating-rate maturity with a non-call period of three years.

Under the letter of credit agreement between Deutsche Bank and CNG, Deutsche Bank collects a facility fee and earns a return on cash raised through the offering. The facility fee plus a return is then passed on to note holders of the deal. Should CNG experience a default on its obligations under the letter of credit agreement, Deutsche Bank assigns its claims under the letter of credit to investors.

The privately placed credit-linked note structure may provide more deals in this year's market. The structure is an alternative way for utilities and energy providers to raise letters of credit away from bank credit facilities, which feed most of the lending needs of the sector.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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